Starting up a side business on ebay, etsy and website - Tax Questions

WaggingTongue

Hi Everyone

Sorry if this is a long message but please bear with.

Ok basically I would like to start a side business selling items on ebay, etsy and also have a website, (thinking of going with godaddy for that), I sell various craft items such as paint and brushes and the likes, along with keyrings and coasters, I plan to have a few ebay accounts as I want to keep some items separate, this is easier for me.

In light of the recent HMRC thing and bearing in mind that I've never ran a personal business before I would just like some pointers and guidance.


So from start to finish I'm assuming I would need to keep receipts from everything I buy.

Receipts for : all the items that I need to make the end product such as labels, tins, keyring holders etc etc.

Also I'm assuming I would need to keep receipts for packing item such as boxes, packing tape, bubble wrap, thermal printer rolls, fragile stickers, jiffy bags

The other main question is I've bought items already such as thermal printers, an expensive photo printer, laptop just to use with my business, so what can I do I need to include receipts for those when submitting my end of year tax return, also what is it you get back from them?

Also I currently have a storage locker which I plan to store stock which I pay around £150 per month so can I claim something back from this too?

The other thing is with keeping everything separate such as ebay accounts, etsy and website do i just work everything out on a whole or list the separate channels? 

I've not looked into the tax thing yet and want to try and do this myself instead of getting having a outlay of getting this done for me,  will HMRC knock off all the cost price for items and work out the net profit or do I have to submit this myself with everything worked out for each item, bearing in mind it will be a fair few 1000 items at the end of the tax year.

I currently work full time but I don't go over £22k, so not sure what the current tax deduction would be, this is something I want to build on year on year.

If someone could just give me some pointers that would be great.

Thanks

swingaloo

Please make sure you have researched this properly. Its almost impossible to make a profit on Ebay  if you are paying for storage etc. My stepdaughter has just spent over £2000 on stock to make keyrings and sell them. She sold 18 in 4 months on Ebay. 

silvercar

If your total sales in the tax year is under £1000, you are below the trading allowance and don't need to declare anything.

The other option is to calculate profit, take off all your costs (purchases, storage, postage, fees etc) from the total sales and pay tax on the difference. This would be at your marginal rate. You would need to work all these out, though a simple spreadsheet would suffice.

soolin

I have a slight concern that you appear to have spent/invested a great deal of capital into your business without having a clear business plan. Online retail sales especially of hand made items are poor at the moment and even the £150 pm storage unit seems a massive outlay.

What research have you done. do you have a fully costed business plan - are you happy that you can make enough after expenses and tax to cover your own goings within a decent period of time? Have you looked at similar items, seen what actually sells and at what price?

As for the tax side of things if you are wanting to recover any part of the costs for things like the laptop and equipment then you won't be able to do cash basis (to me the simple) form of accounts, you will need to use a depreciating capital asset basis and for that you are likely to need the guidance of an accountant , perhaps to set you on the right path. You can't just claim back the full amount. You must also submit your own full accounts to HMRC, they don't work out your profit and loss- they just use what you supply, if they have any queries then they will contact you for clarification or investigation.

Basically though you need to ensure you keep full accounts, I am still old school and keep mine in books (I use cash accounting though) but there are online programmes that can do it for you. You enter all your income, that includes extras received like postage etc, and all your expenses - materials, stationery , outward postage. ebay and etsy fees etc. You will also need to work out , with the assistance of your accountant, a suitable percentage of other shared costs, the lap top, storage unit, etc. Full accounts need to be submitted annually and you will pay tax at your marginal rate if you show a profit. I would suggest that all your online sources can be lumped together as they are all the same business.

Remember as well when doing your business plan that ebay will require you to have a business account, so your listings will cost 35p each, etsy is currently about 18p per listing- both will also charge you FVFs on both item cost and postage. 

Potbellypig

WaggingTongue said:

Hi Everyone

Sorry if this is a long message but please bear with.

Ok basically I would like to start a side business selling items on ebay, etsy and also have a website, (thinking of going with godaddy for that), I sell various craft items such as paint and brushes and the likes, along with keyrings and coasters, I plan to have a few ebay accounts as I want to keep some items separate, this is easier for me.

In light of the recent HMRC thing and bearing in mind that I've never ran a personal business before I would just like some pointers and guidance.


So from start to finish I'm assuming I would need to keep receipts from everything I buy.

Receipts for : all the items that I need to make the end product such as labels, tins, keyring holders etc etc.

Also I'm assuming I would need to keep receipts for packing item such as boxes, packing tape, bubble wrap, thermal printer rolls, fragile stickers, jiffy bags

The other main question is I've bought items already such as thermal printers, an expensive photo printer, laptop just to use with my business, so what can I do I need to include receipts for those when submitting my end of year tax return, also what is it you get back from them?

Also I currently have a storage locker which I plan to store stock which I pay around £150 per month so can I claim something back from this too?

The other thing is with keeping everything separate such as ebay accounts, etsy and website do i just work everything out on a whole or list the separate channels? 

I've not looked into the tax thing yet and want to try and do this myself instead of getting having a outlay of getting this done for me,  will HMRC knock off all the cost price for items and work out the net profit or do I have to submit this myself with everything worked out for each item, bearing in mind it will be a fair few 1000 items at the end of the tax year.

I currently work full time but I don't go over £22k, so not sure what the current tax deduction would be, this is something I want to build on year on year.

If someone could just give me some pointers that would be great.

Thanks

Have you actually started selling anything yet? Whilst it's great that you're looking ahead to your tax affairs, get selling some stuff, see if it sells, see if the renumeration is the correct trade off for your time and then get back in 6 months to see if you need to work on tax efficiency. Oh and I'd get rid of the £150pm storage locker, it will kill your profit before you've even got going. 

DullGreyGuy

WaggingTongue said:

Hi Everyone

Sorry if this is a long message but please bear with.

Ok basically I would like to start a side business selling items on ebay, etsy and also have a website, (thinking of going with godaddy for that), I sell various craft items such as paint and brushes and the likes, along with keyrings and coasters, I plan to have a few ebay accounts as I want to keep some items separate, this is easier for me.

In light of the recent HMRC thing and bearing in mind that I've never ran a personal business before I would just like some pointers and guidance.


So from start to finish I'm assuming I would need to keep receipts from everything I buy.

Receipts for : all the items that I need to make the end product such as labels, tins, keyring holders etc etc.

Also I'm assuming I would need to keep receipts for packing item such as boxes, packing tape, bubble wrap, thermal printer rolls, fragile stickers, jiffy bags

The other main question is I've bought items already such as thermal printers, an expensive photo printer, laptop just to use with my business, so what can I do I need to include receipts for those when submitting my end of year tax return, also what is it you get back from them?

Also I currently have a storage locker which I plan to store stock which I pay around £150 per month so can I claim something back from this too?

The other thing is with keeping everything separate such as ebay accounts, etsy and website do i just work everything out on a whole or list the separate channels? 

I've not looked into the tax thing yet and want to try and do this myself instead of getting having a outlay of getting this done for me,  will HMRC knock off all the cost price for items and work out the net profit or do I have to submit this myself with everything worked out for each item, bearing in mind it will be a fair few 1000 items at the end of the tax year.

I currently work full time but I don't go over £22k, so not sure what the current tax deduction would be, this is something I want to build on year on year.

If someone could just give me some pointers that would be great.

Generally, you can claim expenses for anything that is used solely and purely for the purposes of your business. You submit only your tax return before the end of January after the end of the tax year however HMRC naturally has the right and obligation to ask questions about anything that looks off and hence you keep your receipts etc for if they do. You pay for their time when they do an investigation. 

Sole traders are prone to buying things that are for a blend of personal and business use and then claim 100% of their value hence it wouldn't be totally surprising if you get challenged on if you never touch the expensive photo printer outside of work (why does an online retailer need an expensive photo printer?)!

You need to do a fair bit of reading about if you will be doing cash accounting or accrual and also capital purchases as you seem to be running ahead of yourself committing to assets  and expenses that may be questionable based on what you have said so far.